A major study into the law that governs commercial landlords and tenants has called for "quicker, simpler and clearer" rules to help UK businesses, and laid out a series of priorities for the government's review, which was launched on last week.
The Property Litigation Association’s survey of its 1,600 members found they thought the Landlord and Tenant Act 1954 still strikes a fair balance between landlords and tenants but there is an urgent need to streamline the process to enable economic growth.
The survey comes as the government announced a review of the Act, which has not been updated since 2004. It controls the legal interactions between landlords and tenants and provides the rules for how they operate and renew their leases.
Its provisions have been essential for creating a stable business environment and act as the bedrock of the relationship between occupiers and owners in the property sector. One of its key provisions is "security of tenure", which ensures tenants have the right to stay at the end of their lease term unless a property is being redeveloped or the landlord can establish another reason for opposing.
Critics point out that in the decades since it was last updated there has been a massive shift in the relationship between landlords and tenants. Shorter lease terms, more difficult trading conditions, the digital revolution and wider changes in working and shopping practices have all undermined the system.
The PLA says its review of its 1,600 members is now being turned into a major report aimed at informing the impending government review of the Act, which is being carried out by the Law Commission. The PLA survey found overwhelmingly that lawyers representing the interests of both owners and occupiers did not want a wholesale tearing up of the system but improvements in speed and clarity.
Dellah Gilbert, chair of the PLA and partner at Maples Teesdale, said the system is "not broken, but it still needs fixing".
She added: "What a review must ensure is that it makes the system quicker, clearer and simpler. With the economy wobbling we need the right processes in place to create an efficient environment that allows business to flourish. This study is an essential contribution towards the development of a fairer legal framework that better serves property owners, occupiers, the economy and the environment.”
The review finds this streamlining could include guidance notes to narrow down conflicts at an earlier stage, increased digitalisation and less time in courts.
Other clarifications are needed in key areas putting strain on the relationship between landlords and tenants, it says.
In summary, a resounding 90% of respondents said security of tenure must stay while 70% said the tenure regime strikes a fair balance between landlords and tenants.
Seventy-six percent wanted a guidance note or protocol to help agree lease renewals that would narrow down issues at an early stage, while 80% said the contracting out (an agreement by the tenant to forgo security of tenure) process could be simplified. That would modernise the procedure so that it could be done by email and with electronic signatures.
Seventy percent of those surveyed said tenants should have the right to renew their lease on the basis of turnover rents while 87% said leases should be renewed on the existing terms. Eighty-five percent said more emphasis should be paid to market conditions at renewal.
Other areas proved more divisive, notably environmental, social and governance considerations.
Currently, the grounds on which a landlord can evict a tenant who wants to stay at the end of a lease centre on an intention to redevelop the property. However, many necessary ESG upgrades would not be counted as redevelopment works, potentially leading to conflict. Of those surveyed 46% thought that the redevelopment ground should not be widened to oppose renewal to undertake energy efficient improvements.
There was similar disagreement as to whether courts should be involved in the process at all, with only 47% responding yes, as they were often cited as a main cause of delays in negotiations.
The PLA said it will produce an independent, evidence-based report including analysis and recommendations for policymakers.
The study was designed by the PLA, its members and a group comprising academics specialising in property law from leading UK universities, Emily Carroll, associate professor in law, Birmingham University; Michael Haley, professor of property law, Keele University; and James Lee, professor of law, King’s College London.
Paul Tonkin, chair of the body's Law Reform Committee and partner at Hogan Lovells, said: “This is one of the most important studies the PLA has ever undertaken. What we can see is while there are still questions over some specific parts of the Act, it is still fit for purpose and provides a fair playing ground between landlords and tenants.
“Given everything that businesses have been through in recent years, the study is sure to bring some interesting experiences to light – which we look forward to sharing with policymakers and the wider industry.”